ECONOMY AND EFFICIENCY 

IN THE 

GOVERNMENT SERVICE 


ADDRESS BEFORE THE UNION 
LEAGUE CLUB OF CHICAGO 
ON FEBRUARY 22, 1911 

BY 

CHARLES D. NORTON 


' 35 " 2-3 2 - 








I 


r 













/ ■ 


MAR 7 ISIi 
■■ S. Cf 


r/ 


.*. : 
* • 




4 






ECONOMY AND EFFICIENCY IN THE 
GOVERNMENT SERVICE. 


George Washington’s administration conducted the public 
business with only 136 employees. President Taft, in reply to a 
Senate resolution yesterday, said that the total number of offi¬ 
cers and employees of the United States Government was 
411,322, exclusive of enlisted men and officers of the Army and 
Navy. After two short and pleasant years in the Government 
service, I wish, before leaving it, to say, in the first place, that 
economy and efficiency really do exist in a high degree in cer¬ 
tain activities of the Government. What private business con¬ 
cern receives at any price such able, loyal service as the people 
receive from the Federal judiciary or from the officers of the 
Army and the Navy? Chief Justice White is paid $13,000 per 
year. Col. Goethals, in supreme control of one of the greatest 
public works ever undertaken, receives a salary of $15,000. Gen. 
Grozier, Chief of Ordnance, who can build a 14-inch Navy gun 
at Watervliet Arsenal for $59,400, including in the cost the usual 
commercial overhead charges, interest on plant, depreciation, 
etc., as against the lowest bid of $74,770 from a private concern, 
is paid $6,000 per year. Dana Durand, who in two short years 
has developed a huge organization on nonpolitical lines, and is 
expending $12,000,000 with the utmost skill and economy in an 
accurate census, is paid $7,000 per year. Joseph E. Ralph, Di¬ 
rector of the Bureau of Engraving and Printing, an Illinois man, 
one of the ablest, most courageous, and determined soldiers who 
ever fought in the war on extravagance and waste, whose inven¬ 
tive methods have saved millions for the Government, is paid 
$5,500 per year. 

Despite such shining examples, and I could mention many 
others, I am convinced that President Taft’s inquiry into 
economy and efficiency of the Government will ultimately 
result in immense annual savings, because an analysis by ex¬ 
perts of the business methods of any Government bureau almost 
always indicates a saving of a substantial percentage in yearly 
expenses. 


81435—11 


1 



2 ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 

The two great causes of waste and inefficiency in the Govern¬ 
ment service are, first, lack of administrative control and, 
second, discouragement and indifference of the personnel. 

Let us consider first the question of administrative control. 
The President is, so to speak, the head of a business that ex¬ 
pends approximately one thousand millions per year. He is 
assisted by appointive administrative officers, the most impor¬ 
tant of whom have an average tenure of less than three years, 
who are without previous experience in the Government serv¬ 
ice, and who are therefore forced to rely largely upon their 
subordinate bureau chiefs for information. A President, a 
Cabinet, and their assistants must all be men of high capacity, 
competent to assume large responsibilities; but at the present 
time they have not sufficient means of securing the data neces¬ 
sary to think intelligently and act intelligently on the business 
under their control. The first step in the expenditure of this 
thousand million dollars is a request for appropriation from 
Congress. This request is made in the form of an estimate by 
the executive officers of the Government. The estimates, how¬ 
ever, do not go to Congress in the form of a budget, with the 
objects of expenditure classified in a businesslike way. There 
is no statement such as would be presented to a board by the 
head of a corporation, nor are the needs of the departments con¬ 
sidered as a whole. 

One great bill, called the “ legislative bill,” is supposed to 
represent salaries. The “ sundry civil bill ” is supposed to 
represent the general expenses of the executive departments. 
Now, the legislative bill does not include all of the salaries, 
and it does include many general expenses. The sundry 
civil bill does not include all of the general expenses; it 
includes many salaries and much general legislation. This 
is demonstrated by the fact that according to the Treasury 
classification of expenditures for the year 1910, based on 
appropriations, $132,000,000 were spent for personal serv¬ 
ices, whereas, as a matter of fact, in excess of $300,000,000 
were expended for salaries in 1910. These two bills go 
before the so-called “ House Committee on Appropriations.” 
But entirely independent of the Appropriations Committee 
of Congress there are seven other committees which have 
charge of bills carrying appropriations. The Army bill is 
submitted to the Military Committee, and the chairman of the 
Military Committee consults not at all with the chairman of 
the Appropriations Committee when determining how much 
money to appropriate for the Army. He works entirely in¬ 
dependently of him, just as the chairman of the Naval Com- 


ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 3 

mittee, in charge of the naval bill, works entirely independent 
of the other two. Then there is the Post Office Committee, and 
the Indian Committee, and the Foreign Affairs Committee, and 
the Rivers and Harbors Committee, and the Agricultural Com¬ 
mittee. All of these committees have before them estimates 
upon which they are to make appropriations, each chairman 
reporting such a bill as in the judgment of his committee should 
be reported direct to the House, without any consultation or 
team play with the other chairmen. And what is the result? 
Utter lack of control on the part of Congress, and, indeed, a 
kind of competition between the committees for the acquisi¬ 
tion of power represented by large appropriations, instead of 
a judicial consideration of the needs of the service as a whole. 

Suppose Congress were to correct this decentralization and 
were to consolidate the consideration of all estimates into one 
general appropriations committee? This of itself would not 
enable Congress to think and act intelligently on public expendi¬ 
tures, for the reason that the form in which the estimates are 
submitted, and in which the law requires them to be submitted, 
gives the Congressman none of the real information which he 
needs in order to form an intelligent judgment as to whether 
the estimate should be granted. There is nothing in the esti¬ 
mate to indicate what has been the cost in the past of doing 
the work for which an appropriation is asked. There is noth¬ 
ing to indicate whether the work has been done economically 
or not; and the only way in which the Congressman can form 
a judgment on that subject is to call in the bureau chief, and 
indulge in a sometimes friendly, sometimes critical, and often 
protracted debate. Congressmen are not expert accountants, 
nor are they expert administrators. Indeed, the bureau chiefs 
too often are not; and, as a result, the stenographic reports of 
the cross-examinations of bureau chiefs by the congressional 
committees are as a rule either a very amusing or a very 
pathetic commentary on the system. 

I remember, for instance, sitting in the room of the Appro¬ 
priations Committee for the larger part of one afternoon while 
the entire energies of six or eight distinguished Congressmen 
were concentrated upon an effort to demonstrate to a stubborn 
bureau chief that a shed which he proposed to build for some 
guinea pigs, kept for experimental purposes, should be made of 
wood and not of concrete. 

Frequently an Appropriations Committee chairman, like 
Randall or Tawney, by long residence in Washington and 
by careful and painstaking work, becomes so familiar with the 
activities of certain of the bureaus as to become a highly intelli- 


4 ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 

gent critic of their work. But the only way to bring about econ¬ 
omy and efficiency in all the Government is to so organize the 
business of the Government that the administrators themselves 
shall have accurate information on those points with regard to 
which an administrator must be advised in order to act intelli¬ 
gently. Congress needs that same information. All this public 
money is spent for something. Every dollar of it goes into some 
object of expenditure, and we must stop talking about expending 
our money in legislative bills, and in military bills, and in naval 
bills, and in sundry civil bills; and we must begin to talk about 
expending our money in “ salaries,” in “ traveling expenses,” 
in “ material,” in “ equipment ”—things that can be precisely 
defined down to the last detail. In other words, all the objects 
of expenditure of the Government must be completely and 
accurately classified; the man who spends money must indicate 
on the expenditure document exactly what he spent it for, and 
then a judgment can be formed whether he spent it well or ill. 
The Government of the United States must get down to the 
humble details of devising intelligently its requisitions, its 
orders, its vouchers; it must provide for a simple and effective 
system of inspection and audit. It must provide, as it does 
not do at the present time, a method of accounting and report¬ 
ing which will promptly and accurately inform the officer as 
to what is going on. 

The Daily Treasury Statement of disbursements and the 
records of the expenditures are based mainly upon advances 
to disbursing officers. As a result, there can be only a rough 
approximation to the cost of operation—one month with another, 
one year with another. The auditors, under the present system, 
act on a transaction five to nine months after the transaction has 
taken place. There are always in the hands of disbursing officers 
and auditors unaudited vouchers amounting to from four to 
seven hundred millions of dollars. There are outstanding un¬ 
known millions of bills which have not been vouchered, and 
other unknown millions of unpaid vouchers of which no record 
is made. Not only is the amount of the liabilities an unknown 
quantity to the administrator, who is running his bureau or 
division, but in many instances he does not even know what 
contracts have been entered into, what purchasing orders are 
outstanding, and what amount of money he really has to run 
it with. Worse than this, much evidence presented to the 
auditor for the settlement of claims is such as would not be 
received as evidence in a court. Imagine a Federal court pass¬ 
ing upon the validity of claims aggregating one thousand mil¬ 
lions per year, and basing decisions upon hearsay evidence. 


ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 5 

with practically no statement of fact from the persons who 
have knowledge of what actually took place. 

Under such conditions, if a man goes into public life in Wash¬ 
ington, and if he wishes to be comfortable and popular, he will 
bow to ancient customs, to systems devised 100 years ago; he 
will become a dignified automaton. If he tries to make changes 
he will incur the enmity of individuals in and out of the service 
and of their newspaper friends; he is certain to be misunder¬ 
stood, and he is liable to be viciously attacked. As a result, 
men keep away from the dry subject of administrative better¬ 
ments automatically, and confine their attention to questions of 
public policy, politics, and the other pleasanter and more di¬ 
verting occupations than the study of economy and efficiency. 
After a short period, it becomes very clear to any subordinate 
official in any department that “ economy and efficiency ” is 
bad politics, and is a subject to be avoided, unless the head of the 
department is intensely interested. In the same way, if the 
head of a department interests himself in that subject and gets 
results he will be disheartened if extravagance and waste 
go unchecked in other departments or in Congress. While 
he may, by hard toil, save his thousands or even millions, some 
colleague or the Congress may be spending freely and without 
regard to his laborious savings. It is clear that control of Gov¬ 
ernment expenditures can never be obtained until the Presi¬ 
dent himself, his Cabinet, and the committees of Congress 
jointly interest themselves in the enterprise. 

President Taft has taken the initiative. He has established 
an inquiry into the economy and efficiency of the Government, 
and has organized committees on this subject in all of the de¬ 
partments. Several hundred men are now studying the subject 
under expert direction. This inquiry should not end until the 
President and the Congress have joined hands to correct the 
method of recording transactions, inspecting, auditing, and 
reporting transactions and results, so that Congress and the 
President can get an intelligent view of what is going on, and 
anyone who is interested can go right down through the Book of 
Estimates, down through the bureau chief to the thing bought 
and the man who bought it, the service performed and the 
man who performed it, and form a judgment as to whether 
that money was expended well or ill. The reclassification of 
the estimates which is being made under the direction of the 
President indicates, for instance, that for the current year the 
Government of the United States proposes to expend about 
$12,000,000 in traveling expenses. 


6 ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 

Probably never before was it known how much the Govern¬ 
ment expended or expected to expend in traveling expenses in 
any one year. Traveling expenses are buried away in miscel¬ 
laneous and contingent expense accounts, where they can not 
be reached and can not be analyzed. The very fact that so 
much as $12,000,000 goes into traveling expenses arouses curi¬ 
osity, and, although the inquiry has hardly begun, it has already 
been discovered that in many well-run bureaus the Government 
gets the benefit of the lowest mileage rate, and that in one of the 
greatest departments a system of transportation orders results 
in that department paying 10 per cent more for a trip from 
Washington to New York and return, for illustration, than you 
and I would pay if we bought our transportation as individuals 
intelligently. If there is a possibility of a 10 per cent saving 
on a $12,000,000 item of expenditure, that is exceedingly inter¬ 
esting to any administrator. 

If a committee of experts on transportation can go into the 
travel accounts of every department and bureau and division 
of the Government; if they can find on the travel voucher or 
the expenditure document an accurate statement of precisely 
what kind of ticket was bought, then the administrator, the 
Congressman, or the citizen, or their expert whom they employ 
to analyze expenditures for them, can form an accurate and 
intelligent judgment as to whether that expenditure was made 
economically and efficiently. And not until our disbursements 
are so classified, not until the expenditures are so recorded, 
can we go back to the expenditures themselves and form intelli¬ 
gent judgments. This is no small undertaking, but it has been 
begun, and well begun, and it will be finished, under the persist¬ 
ent, businesslike direction of the President of the United States. 

The second bar to economy and efficiency in the Government 
service concerns the personnel, and of that I shall say only this; 
Civil-service reform has captured this country. The Govern¬ 
ment of the United States, with important exceptions, is now 
almost entirely within the classified service. I congratulate the 
civil-service reformers on their wonderful achievements in this 
direction. It is a pity that the higher officers of the Govern¬ 
ment, men who are not responsible for questions of policy but 
men of the grade of Assistant Secretaries of the departments 
and Assistant Attorneys General, are not within the classified 
service, for it is not right, it is not good business, to withhold 
the prizes of business or of Government from the more intelli¬ 
gent and efficient men lower down in the ranks. 


ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 7 

You have nearly succeeded in the fight to keep the spoilsman 
out and to get the efficient man in. Now, what practical sug¬ 
gestion do civil-service reformers offer for the benefit of the 
keen and efficient man in the civil service, who has worked 
hard and well, but who is discouraged because he sees no hope 
of promotion as a reward for effort? What incentive will you 
offer him to offset the large rewards that follow the keen and 
efficient man in private life? And what do you propose to do 
about getting the efficient man out of the public service when 
he becomes inefficient or superannuated? The Government 
service is paralyzed by the presence in it of probably 25 per 
cent of its servants who have become incompetent either 
through superannuation or for other reasons. In my personal 
judgment, some system to compel Government employees to 
save from their current salaries sufficient funds to provide 
themselves with old-age pensions—some such system as that 
recommended by Congressman Gillett, of Massachusetts, in 
the bill before the present Congress—is imperatively neces¬ 
sary. If we want efficiency and economy, we must adopt some 
such system, for administrators can not or will not thrust out 
of the Government service old and faithful employees when 
they have worn themselves out and are no longer efficient. 

I think it may be interesting to you to be reminded that the 
problem of economy and efficiency in government is not a new 
problem and that President Taft’s inquiry into economy and 
efticiency finds its analogy in a project of the Emperor Augustus 
27 years before Christ, which is described in Ferrero’s Great¬ 
ness and Decline of Rome: 

The better to supervise the financial administration with¬ 
out infringing constitutional limits, he (Augustus) proceeded to 
organize in his own house, for his personal use, a kind of 
treasury department, composed of the most intelligent and 
instructed of his numerous slaves and freedmen. As president 
of the senate, consul, and proconsul of three great provinces, 
he had no difficulty in providing his clerks with all details of 
revenue and expenditure; it then became their duty to keep 
the imperial accounts so that he could tell at any moment what 
the revenue or the expenditure of the republic might be, the 
amount produced by different branches of taxation, the ex¬ 
penses incurred by the several departments, and the measure 
of the national debt. Armed with these private accounts, 
which were often more accurate than those kept by the prae~ 
fecti aerarii Saturni (the deputy public treasurers), he was able 
to test any proposal for financial reorganization which might be 
submitted to the Senate; he could warn or censure personally or 
through the senate magistrates who incurred useless expense or 


8 ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 

were neglectful in the collection of taxes and the administration 
of state property; in short, without the official position or re¬ 
sponsibility of an actual financial minister, he was able to exert 
ministerial authority. 

Gentlemen, we are business men. Let us make this problem 
of economy and efficiency in the Government service our prob¬ 
lem. No people understand the conduct of business better than 
do the American people. No people respond more quickly to 
an opportunity to improve business methods. As business men, 
we owe it to ourselves to support any efforts made by our Gov¬ 
ernment to check Waste and extravagance in government; just 
such active support as Chicago business men have been giving 
to the Secretary of the Navy in his struggle to place his great 
department on a sound business footing. It is the patriotic 
thing to do; it is an interesting thing to do, and it is something 
which we shall be forced to do in any event, for at the present 
time Government expenditures are straining to the utmost 
limit our governmental income. If the revenues from tariffs 
are to be lowered; if the revenues from any source are to be 
lowered, then the expenditures of the Government must be low¬ 
ered or new forms of income must be devised. There is no 
alternative. 

The United States can afford whatever is necessary to pay for 
economical, efficient, progressive governmental activities, pro¬ 
vided they are directed along right lines. Whatever it costs, 
the protection of human life on the seas, the protection of labor 
on the railroads and in the workshops and in the mines, the 
care of the public health, the safeguarding of the interests of 
children, the recognition of art and letters and music, the con¬ 
servation of our national resources; these are fields in which 
the activities of our Government may well be expanded. Our 
Army and our Navy, however small, must be maintained at the 
highest point of efficiency and preparedness. Our judges must 
be properly paid, and the operation of the great departments— 
like Justice and Agriculture and Commerce and Labor—in the 
interests of the whole people, must be pressed to the limit of 
efficiency. Every consideration should impel us as business 
men and as patriotic citizens to turn our attention to stopping 
senseless waste. 

There are those who despair of securing efficiency from a 
democratic form of government. For myself, I do not despair 
of it. On the contrary, I believe that the most efficient and the 
most economical government in the world can be maintained 
and will be maintained in a democracy when the methods of 
transacting public business have been made simple, clear, and 


ECONOMY AND EFFICIENCY IN THE GOVERNMENT SERVICE. 9 

understandable. In a civil service, defended from partisan and 
political attack from without, defended against superannuation 
and inefficiency from within, transacting and recording its busi¬ 
ness in such a way that an expert of the chartered accountant 
or comptroller type can go into the operations of any and every 
division of the Government and come out with a clear, under¬ 
standable report—in such a service there will arise a healthful 
competition in efficiency and economy between the heads of 
the divisions and bureaus, and when that day comes the people 
will cease to view with distrust the enlargement of the bene¬ 
ficial activities of government. 

Union League Club, 

Chicago, February 22, 1911. 

o 

















LIBRARY OF CONGRFQQ 

„ ■■■iniii 

0 028 070 935 9 



